Correlation Between POSCO Holdings and ENTERGY
Can any of the company-specific risk be diversified away by investing in both POSCO Holdings and ENTERGY at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining POSCO Holdings and ENTERGY into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between POSCO Holdings and ENTERGY, you can compare the effects of market volatilities on POSCO Holdings and ENTERGY and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in POSCO Holdings with a short position of ENTERGY. Check out your portfolio center. Please also check ongoing floating volatility patterns of POSCO Holdings and ENTERGY.
Diversification Opportunities for POSCO Holdings and ENTERGY
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between POSCO and ENTERGY is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding POSCO Holdings and ENTERGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENTERGY and POSCO Holdings is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on POSCO Holdings are associated (or correlated) with ENTERGY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENTERGY has no effect on the direction of POSCO Holdings i.e., POSCO Holdings and ENTERGY go up and down completely randomly.
Pair Corralation between POSCO Holdings and ENTERGY
Assuming the 90 days horizon POSCO Holdings is expected to generate 1.25 times less return on investment than ENTERGY. In addition to that, POSCO Holdings is 1.71 times more volatile than ENTERGY. It trades about 0.14 of its total potential returns per unit of risk. ENTERGY is currently generating about 0.3 per unit of volatility. If you would invest 7,297 in ENTERGY on November 30, 2024 and sell it today you would earn a total of 803.00 from holding ENTERGY or generate 11.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
POSCO Holdings vs. ENTERGY
Performance |
Timeline |
POSCO Holdings |
ENTERGY |
POSCO Holdings and ENTERGY Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with POSCO Holdings and ENTERGY
The main advantage of trading using opposite POSCO Holdings and ENTERGY positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if POSCO Holdings position performs unexpectedly, ENTERGY can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in ENTERGY will offset losses from the drop in ENTERGY's long position.POSCO Holdings vs. Austevoll Seafood ASA | ||
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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